Patient, Public & Media Information

A Record Payout from a Broken Malpractice System

Editor’s note:This article is the first part of a two-part series. The second part will be featured in the November issue of AAOS Now and will focus on how healthcare reform and burnout can impact malpractice.

Eeric Truumees, MD

In early July, we learned of the largest single payout to a patient for medical malpractice. The case involved spine surgery, so my friends—both those in health care and not—asked me to comment. I dutifully read the news, which focused on the mammoth $135 million verdict but offered only the barest sketch of the facts of the case. When the defendant’s side is presented at all, it is the plaintiff’s attorney’s derisive account. At least as of this issue going to press, the defendants have chosen not to comment. The size of the verdict and attention around the case led me to look more closely at the current state of malpractice, but from the one perspective rarely covered in the lay media: the physician’s perspective. In this first half, we will look at the mechanics of malpractice torts. In the second, we will look at the impact of such suits on physicians and the possibility of reform.

In short, eight years ago, a then-10-year-old girl underwent scoliosis surgery. Postoperatively, she experienced pain and neurological dysfunction. The plaintiff contends that the surgeon ignored the complaints and went on vacation (twice). Ten days later, another surgeon took the patient back to the operating room and removed the implants. Unfortunately, the patient’s clinical course included one year of wheelchair use before she returned to ambulation and, apparently, permanent incontinence.

With the available information, it would be pure speculation to assume what really happened (A hematoma? Misplaced screw? Cord infarct?) and the degree to which fault, if any, lay with the surgeon or his team.

As most of our readers know, medical malpractice cases are civil lawsuits involving a tort. The goal is to address a civil wrong and, as much as possible, make the patient whole through the payment of damages. Other reported benefits, as cited by Mello et al., include “other forms of ‘corrective justice’ for injured persons, which produces psychological benefits; and it reduces future injuries by signaling to healthcare providers that they will suffer sanctions if they practice negligently and cause injury.”

As a spine surgeon, I found the unanswered medical questions interesting, and the case prompted other questions about our malpractice system. I wondered: Does this system work? With a payout this large, who pays? How will the verdict impact this (and other) patients? How will it and, more broadly, malpractice tort affect physicians and the healthcare system? Where is tort reform in all of this?

Who pays, and why didn’t they settle?

I suspect that the defendants have not responded to the lay media because they intend to appeal the award. Ultimately, the actual award to the patient may be much lower. With that said, $135 million is well above a doctor’s malpractice insurance limits. How does this work for a hospital? Most large institutions are self-insured. So what impact would this judgment have on that hospital’s ability to serve its inner-city population?

A frequent question I observed from both physicians and the public was, “Why didn’t they settle?” When a physician buys his or her own malpractice insurance, it may have a consent-to-settle clause.

In theory, such clauses give physicians the right to resist settlement. However, as noted in a 2013 Medscape report, many policies also include a “hammer clause,” which leaves a doctor liable for any difference between the proposed settlement amount and the final award. Even physicians otherwise seeking vindication may not accept this sizable personal risk and accede to the malpractice insurance carrier’s recommendations to settle. When physicians are employed by a hospital, their role in such decisions is far less clear and, likely, quite limited.

In the Medscape article, oncologist Richard E. Anderson, MD, chief executive officer of The Doctors Company in Napa, Calif., a physician-owned medical malpractice insurer, describes some of the considerations in the decision to settle. He noted two reasons to fight: You believe there is no liability or the patient’s demand is unreasonable compared to the liability involved. There are more reasons to consider settlement, including:

a less-than-convincing defense expert witness

a plaintiff (you) who does not project “a sympathetic image to the jury”

“an exceptionally sympathetic plaintiff”

nuisance settlements, made when doctors cannot or do not want to go to court for practice, health, family, or other reasons

composition of the jury

jurisdiction in which the trial will be held. Doctors are projected to have an advantage in conservative districts, but plaintiffs may have an edge in liberal districts.

recent decisions by state supreme courts on issues pertaining to the case

In this year’s landmark case, little additional information is available about the defendants, other than the hospital in which the surgery was performed. Given that some hospitals are self-insured whereas others—usually smaller, independent facilities—purchase insurance, costs and limits of coverage are difficult to determine. Physicians should be aware of any joint and several liability laws in their state.

Joint and several liability laws seek to ensure that an injured party is “made whole” if one or more of the defendants is unable to pay his or her share of the damages. Although this approach is favorable to the plaintiff, it increases the odds that every physician involved in a patient’s care will be named in a suit. For orthopaedic surgeons, as with this case, liability related to hospital-based care typically also includes the hospital itself, as it represents “deep pockets.” However, when no hospital or large corporate entity is involved, the orthopaedic surgeon may have to pay an entire judgement, even when his or her responsibility is minor or limited. For orthopaedists operating at ambulatory surgery centers, concepts of vicarious liability vary from one state to another, so it is important that physicians understand the rules in their states.

At the state level, tort reform efforts often include limiting joint and several liability. Currently, there are three common approaches to dividing financial liability among defendants:

Pure joint/several liability: Each defendant remains responsible for the entire damage award, regardless of their degree of responsibility for the injury. As of May, eight states continue to use this approach: Alabama, Delaware, Maryland, Massachusetts, North Carolina, Pennsylvania, Rhode Island, and Virginia.

Pure several liability: At the other end of the spectrum, a defendant is liable for the portion of the damages proportional to their percentage of liability. Currently, 14 states use this principle: Alaska, Arizona, Arkansas, Connecticut, Florida, Georgia, Indiana, Kansas, Kentucky, Michigan, Tennessee, Utah, Vermont, and Wyoming.

Most states split the risks between the plaintiff and the solvent defendants. These modified joint and several liability rules vary but typically hold a defendant responsible for the entire verdict, only if their percentage of fault is above a specified level. Twenty-eight states utilize a version of this approach: California, Colorado, Hawaii, Idaho, Illinois, Iowa, Louisiana, Maine, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Dakota, Ohio, Oklahoma, Oregon, South Carolina, South Dakota, Texas, Washington, West Virginia, and Wisconsin. In Texas, a defendant is responsible for the entire verdict only if his or her individual responsibility is at least 50 percent.

Impact on the patient

Virtually every article covering the historic malpractice case quoted plaintiff attorney Jeffrey Fieger saying, “She’ll have enough money to get her catheter changed for the rest of her life. That’s it.” As significant as this patient’s injuries appear to have been, this dismissive approach to such a massive settlement is shocking, though he called the jury “heroic.”

It took eight years from the date of injury to trial, and with appeals likely to extend this even longer, Mr. Fieger’s statement begs the question, “Does the tort system help patients?” Several papers have utilized teams of physicians to assess closed malpractice claims and determine the relationship between claim strength and the probability of a payout. Most have concluded that these “lottery-sized” payouts are exceptions; more typically, the tort system functions reasonably with a strong relationship between claim strength and probability of payout.

Of course, the strength of that relationship is perceived differently among various stakeholders. For example, in a 2006 New England Journal of Medicine article, Studdert et al., reviewed a random sample of 1,452 closed malpractice claims from five liability insurers. They sought to determine whether a medical injury had occurred and, if so, whether that injury stemmed from a medical error. Three percent of the claims had no verifiable injury, and another 37 percent involved injuries, but they were not due to physician error. The researchers concluded that 72 percent of the claims not associated with errors did not result in compensation to the plaintiff. But the physician’s perspective may focus on the 28 percent of cases without demonstrable error that did lead to a payout. The researchers pointed out that 73 percent of the claims in which a medical error did lead to patient injury, the mean compensation paid was $521,560. Of the claims in which the plaintiff prevailed but no error was identified, a lower mean payout was recorded at $313,205.

In 1996, Brennan et al., followed 51 litigated malpractice claims in New York over a 10-year period. During that time, 46 cases were closed, and 10 of the 24 cases in which the authors were not able to identify an adverse event (AE) still led to plaintiff settlements, with a mean payment of $28,760. Of the 13 cases in which an AE did occur but no negligence was identified, six were settled for a mean payment of $98,192. Of the cases in which negligence led to a permanent disability, seven of eight resulted in settlement for the plaintiff at a mean payout of $201,250. In the researchers’ multivariate analysis, the severity of the disability, rather than the identification of physician negligence, was predictive of payment to the plaintiff. Critics note limitations of the study, including its small sample size and a methodology in which disagreement on negligence led to a “good care” categorization. From a physician point of view, in the absence of a clear consensus of negligent care, a finding of malpractice seems harsh.

Courtesy of seb_ra

These studies, as well as a 2009 review by Philip Peters, JD, which compiled data from similar studies, found “remarkably consistent” data suggesting that between 80 percent and 90 percent of defensible claims were dropped or dismissed without payment. Is this a fair system from the patient’s point of view?

Probably not. Mr. Peters reported that, in a jury trial, physicians win up to 90 percent of the cases with weak evidence of medical negligence, 70 percent of the borderline cases, and even half of the cases with strong evidence of medical negligence. So, if my daughter is the patient, and there is clear evidence that she was harmed by medical negligence, the chance we win our case is only 50/50?

Perhaps a more important condemnation would be the relatively few patients injured by medical negligence who file a claim. According to the Civil Justice Resource Group, only 2.9 percent of the victims of malpractice will file a claim.

Mr. Peters suggested that “the evidence that settlements are closely tied to the merits should come as no surprise. Insurers, like claimants, have an economic incentive to evaluate their cases accurately and to shape their settlement strategies accordingly.” However, Mr. Peters acknowledged that there are few data concerning the impact of a particularly “unappealing” physician or “appealing” plaintiff on the outcomes of trials. He also cited studies suggesting that defendants are much more likely than plaintiffs to hire experienced attorneys, which has been shown to have a marked impact on trial outcomes. In terms of fairness to patients, should these be significant variables?

Ultimately, Mr. Peters noted that a fault-based tort system suffers from the “limits of human capacity to reconstruct past events and the inevitable subjectivity of judgments about the quality of past performance.” Others have argued that subjectivity is further compromised when “standard of care” is used as a reference. For example, Brenner et al., concluded that “standard of care is an inaccurate measure of medical negligence because it is premised on the faulty notion of conformity to norms.” Even Mr. Peters cited “high rates of disagreement about standard of care or the quality of peer performance.”

If we accept that most injured patients will not receive any restitution, aside from the occasional, headline-making, lottery-sized payouts, how does the average injured patient fare? One of the most intriguing aspects of the Studdert et al., study was its cost estimates. For every dollar spent on compensation, 54 cents went to administrative costs, including lawyers and experts. The authors reasonably concluded that “the overhead costs of malpractice litigation are exorbitant.”

So, we have a very slow, biased, expensive system in which even winning plaintiffs share, on average, 33 percent of awards with their attorneys (expenses are deducted from the award first, of course). Does the system at least help protect patients from negligent doctors? As Sudip Bose, MD, wrote in the Huffington Post in 2017, the answer is a clear “no.” First, hospitals, physicians, and malpractice insurers try to settle the most obvious cases of negligence quickly and quietly. Sure, there is a National Practitioner Data Bank, but, in many cases, the doctor’s name is dropped from the suit before or as a part of the settlement.

Additionally, Dr. Bose noted that medical boards revoke medical licenses for “doing drugs, having sex with patients, committing murder, and other such infractions—but almost never for being a bad doctor.”

In 1991, Farber and White reported that, in the face of an adverse outcome, plaintiffs are “poorly informed ex ante about whether there has been negligence, file suit to gather information.” Arguably, elimination of an adversarial, fault-based system would make it much easier for patients and their families to get the information they need.

In conclusion, the slow, expensive malpractice tort system does not seem to serve injured patients well. The second part of this editorial will examine how the system impacts physicians and what types of reform can be considered.

Eeric Truumees, MD, is the chair of the AAOS Now Editorial Board, editor-in-chief of AAOS Now, and an orthopaedic spine surgeon in Austin, Texas, where he is also professor of orthopaedics at the Dell Medical School, University of Texas.